2022 (9) TMI 529 - HC - SEBI

Offence under the SEBI Act - Illegal fund mobilization by the accused No.1/company - accused No.1 on an aggregate had allotted Non-Convertible Debentures to at least 14256 persons, thereby making it a public issue of securities and this was done without complying with the regulatory provisions applicable to public issue - Learned Judge issued warrant of arrest against the accused persons - complaint for prosecution for violation of Fraudulent and Unfair Trade Practices relating to Securities Market HELD THAT - The petitioner himself has filed a document uploaded in the official portal of the Ministry of Corporate Affairs wherefrom it is ascertained that the petitioner was appointed as a director of accused No.1/company on 4th November, 2013 and he remained as director till 23rd August, 2014. Thus, the petitioner was one of the directors of accused No.1/company during the financial year 2012-13 and 2013-14. It is rightly observed by the learned Trial Judge that an offence under the SEBI Act is punishable for imprisonment which may extend to ten years. As submitted on behalf of the petitioner that in view of the decision of the Hon ble Supreme Court in Satender Kumar Antil vs. Central Bureau of Investigation Anr. 2021 (10) TMI 1296 - SUPREME COURT the initial order passed by the learned Trial Judge issuing warrant of arrest against the petitioner and other accused persons after taking cognizance is bad in law because ordinarily summons ought to have been issued at the first instance against the petitioner permitting him to appear through his lawyer. If the petitioner failed to appear before the trial court the learned Judge was empowered to file bailable warrant. At the third stage, if the petitioner failed to surrender before the court in pursuance to bailable warrant, the trial court was empowered to pass an order issuing non-bailable warrant against the accused/petitioner. On the same analogy, it is submitted on behalf of the petitioner that the impugned order dated 6th May, 2022 is illegal, inoperative and the learned trial judge failed to act within his power vested under the law. Obligation to issue summons against the accused persons after filing of charge-sheet/complaint taking of cognizance arises in respect of the offences falling under Category-A mentioned hereinabove. In respect of the offences mentioned in Categories-B, C and D, the guideline made by the Hon ble Supreme Court in Satender Kumar Antil 2021 (10) TMI 1296 - SUPREME COURT in respect of Category-A is not applicable. We find no illegality or material irregularity in the order dated 6th May, 2022 passed by the learned Special Judge, 5th Court at Calcutta. The instant criminal revision is devoid of any merit and accordingly dismissed on contest.

Summary

Issues:
1. Allegation of illegal fund mobilization by accused No.1/company.
2. Accused No.4's involvement as a director during the financial years in question.
3. Warrant of arrest issued against accused persons.
4. Application under Section 70(2) of the Code of Criminal Procedure to recall the warrant.
5. Challenge to the order rejecting the application.
6. Interpretation of the law regarding issuance of summons and warrants.
7. Compliance with regulatory provisions applicable to public issue of securities.
8. Categorization of offences and guidelines for issuing summons.

Analysis:

1. The case involves allegations of illegal fund mobilization by accused No.1/company through the issuance of Non-Convertible Debentures without complying with regulatory provisions applicable to public issues of securities. The complaint by the statutory body led to the registration of the case and the accused No.4, the petitioner, being one of the directors of the company during the relevant financial years.

2. The petitioner contested his involvement as a director during the financial years in question, but evidence from the Ministry of Corporate Affairs website confirmed his appointment and tenure as a director of the accused No.1/company. This contradicted the petitioner's claim and established his directorship during the period of alleged illegal activities.

3. Following the cognizance of the offence, the learned Special Judge issued a warrant of arrest against the accused persons, including the petitioner. Some accused individuals surrendered and were granted bail, while the petitioner filed an application under Section 70(2) of the Code of Criminal Procedure to recall the warrant issued against him.

4. The learned Judge rejected the petitioner's application, leading to the petitioner challenging this order dated 6th May, 2022, in the instant revision. The petitioner argued that the initial order issuing the warrant of arrest was not in line with legal procedures and cited a Supreme Court decision to support his contention.

5. The petitioner relied on the Supreme Court decision in Satender Kumar Antil vs. Central Bureau of Investigation & Anr. to argue that the warrant of arrest issued against him and other accused persons without prior issuance of summons was legally flawed. However, the Court differentiated between different categories of offences and the corresponding guidelines for issuing summons and warrants.

6. The Court upheld the legality of the order dated 6th May, 2022, passed by the learned Special Judge, emphasizing that the guidelines for issuing summons against accused persons vary based on the category of offences. The Court found no illegality or material irregularity in the order and dismissed the instant criminal revision for lacking merit.

7. The judgment highlights the importance of compliance with regulatory provisions related to public issues of securities and the consequences of failing to adhere to such regulations. The detailed analysis of the petitioner's directorship and the legal interpretation of summonses and warrants provide a comprehensive overview of the case and the Court's decision.